THE Reserve Bank of Zimbabwe (RBZ) has ruled out adopting the South African rand, or joining the sub-regional Rand Monetary Union (RMU), saying the currency is too volatile thus making it too risky.
“We need to understand that the South African Rand has its own challenges: it is volatile,” says RBZ governor Dr Khuphukile Mlambo, while addressing a National Economic Consultative Forum (NECF) meeting in the capital Harare on Thursday (yesterday).
While admitting that the US dollar was not an ideal currency on account of the numerous “headaches” that came with it, he said adopting the South African Rand carried more risks.
He pointed out that while joining the RMU, which is made up of Namibia, Lesotho, Swaziland and SA itself, seemed attractive as an option to enhance business competitiveness, the members were at risk because South Africa only printed currency for its own use to avoid the risk of over-circulation which could lead to deflationary pressures on its economy.
Mlambo said even within the RMU, the circulation of the rand was limited as the other three member states insisted on using it alongside their local currencies.
He said personally, he would have been happier if Zimbabwe had adopted any other currency, but not the USD, as legal tender in 2009. Among other disadvantages, he said the continued firming of USD against other currencies had continuously eroded the market competitiveness of local products.
Zimbabwe adopted a basket of currencies which included the USD, British Pound, Australian dollar, the ZAR and the Botswana Pula as trading currencies in 2009 in a bid to dig the economy out of a decade long melt-down.
A controversial bond note is expected to introduced next month. – Patience Rusere